Lord Davies of Brixton: My Lords, I am happy to take part in this debate. I need publicly to declare an interest as a fellow of the Institute of Actuaries, albeit non-practising. A dashboard is a very good thing, and we want to see it introduced. In truth, my perfect pension system would be one in which you never have to think about it until you retire, and we could dispense with dashboards, but we are not in that space, we have to have a dashboard, and this is the dashboard we have.
As I say, I welcome it. I was involved 25 years ago in discussions about an early progenitor of what we have. At that time it was just too difficult, but with the development of digital capabilities, it has now become a practical reality, and I look forward to it becoming a useful tool for people as they plan for their retirement. Noble Lords can probably tell from my tone of voice that I am heading towards a “but”, but I want to do that emphasising my gratitude for all the work that has been done by the department, the officials and the Pensions Dashboards Programme, as we call it now, although I rather wish they had not adopted the word “ecosystem”.
The regulations before us have to be judged in terms of what the objectives are. What are we having a dashboard for? The starting point was to connect people with their pensions. There was a lack of connection and the figures we have had of the orphan pots are truly staggering and concerning, so any step towards avoiding that problem is to be welcomed. Obviously, people want to know what they have got in those pots. That is straightforward and should be done.
Then we move on to a further stage, of people’s likely income in retirement. This is where things start to get sticky, because the point of telling people that likely income in retirement is as a “prompt for necessary action”—which I think are the words used on the PDP website. The Minister, whom I should have thanked for her detailed and helpful introduction, used the term “informed decisions”—so that people can take decisions commensurate with their retirement aims. I think the model people have in mind is that you look at your pension statement, you think that it is not enough, so you start saving more money. In that sense, it is inevitably and inherently a sales tool. That is one of the problems we face in setting up a dashboard that works in people’s interests.
A point that I have made consistently in discussions about a dashboard is that it has to have the state pension there, but an equally valid—in my view, more important—conclusion that you can draw from your pension statement, if you think your pension is not good enough, is “Well, I’ve got to start campaigning for a better state pension”.
I am going to look in particular, on the basis of that, at what Schedule 3 calls the “value data”. The regulations lead via the 2013 regulations to AS TM1 from the FRC. That is Actuarial Standard Technical Memorandum 1 from the Financial Reporting Council. A new version of that will come into effect from 1 October next year. I picked that up at the very useful meeting that we had with Ministers, but the first DAP for the larger schemes is supposed to be from 31 August 2023, or it could be earlier, which is before we have the new technical memorandum. The whole point of achieving this technical memorandum—it is spelled out in the work that has been undertaken—is that the previous version was not good enough for the dashboard statements. We had to have the new technical memorandum because the old one simply did not work. People could do it on all sorts of bases. You would have a consolidated statement with several figures which could all be calculated on a different basis and were not comparable. So we came up with this new technical memorandum which requires schemes to do it on a standardised basis.
I think it is important when you do that to understand what you are really getting. Is this really an estimate of people’s likely retirement income? I think we need to hesitate before encouraging people to place too much confidence in that understanding of what these figures will be. They will be figures calculated on the basis of a single, predefined set of assumptions. The technical memorandum is well within the bounds of plausibility. It is not necessarily the technical memorandum I would have come up with if I had had to decide, but I cannot point to it and say it is nonsense or misleading. However, it is important to understand that it is only one among a range of possible views of the future, and we are misleading people if we give them any idea that this is what is going to happen. I think it is fair to say that the figure you are presented with is probably the least likely figure of all possible outcomes.
Just as an aside, it is also important that this will be a government-endorsed figure. Make no mistake: the ordinary person seeing this on their pension statement, knowing that this dashboard has been legislated for by  the Government, will see an implicit government guarantee for that figure. There is no way of avoiding that. That is what will happen. Government Ministers can say for all they are worth, “No, we are just facilitating this; it is not our figure”. If, over time, these figures turn out to be woefully positive, the Government will be held to account. A similar disaster happened with endowment mortgages, and we saw what happened there. People believe the figures they are given, are gravely disappointed when they do not appear and look for reimbursement.
I had a very nice letter from the Minister carefully explaining that the technical memorandum did not come into force until after the first of the staging dates. I ask the Minister to confirm my understanding, but I think that the first people who become entitled to go on their dashboard in August will be told, “Sorry, your value isn’t available yet; you have to wait before you can get those figures”. All the anoraks who log on straightaway will be gravely disappointed.
Another problem with the regulations is that small pots are being let off the hook. The way the regulations work—the Minister can tell me if I am wrong—they exclude smaller pots from having to provide figures. This will just compound the problem we are dealing with.
Paragraph 9.1 of the Explanatory Memorandum says:
“This instrument does not give rise to any need for consolidation measures.”
I am sorry, but I disagree. In these regulations we now have quite detailed statements of what information should be disclosed. There are also the principal disclosure regulations of 2013. How can we be sure that the two sets of information are co-ordinated with each other? In addition, another set of figures is being produced for the occupational schemes. Many people, when they get to retirement, will have an occupational scheme, a defined contribution scheme and their state pension. You really need to be in a situation where the three figures can be taken together. I am sure that is the intention, but at the moment it appears that all these different sets of estimates are being calculated in isolation. Again, I hope the Minister can correct me. There is a need to make sure that these calculations work together and are consolidated. I certainly think that these regulations and the principal disclosure regulations need to be consolidated.
I am worried. This dashboard is very important for people’s financial affairs. It will tell them about their pension but, of course, they have many other financial transactions. I was quite disappointed when I saw in some of the material on the Pensions Dashboards Programme website the total rejection of any need for consistency with the concept of open banking. We are told:
“When you dig down a little, you start to see how different the two really are in terms of their audience, purpose and functionality.”
I do not think the ordinary person is that aware of their audience, purpose and functionality. They just have financial information available to them, and it has to be presented in a consistent way overall. The idea of parcelling off the pensions dashboard, saying it has nothing to do with open finance—make no mistake: open banking was only the start and we are now moving on to a stage where there is a big push for  open finance—and having open finance here with all your financial transactions under one heading, and the pension dashboard in a world of its own over there, is clearly wrong. I urge the dashboard programme to put a bit more thought into this.
This is brought into particular light by another Bill, currently in the Commons, called the Data Protection and Digital Information Bill. There seems to have been very little co-ordination between that and the work being done on the dashboard. There is a clear overlap on the crucial issue of the identity service. This is the weakest link in the dashboard: how do we know that people accessing the dashboard are the people entitled to those pension benefits, given the way in which pension benefits get lost? Someone turns up, provides the information—which they have accessed somewhere on the dark web—and gets hold of someone else’s pension. To put it baldly, that is the problem we face. How confident can we be? Confidence relies on an identity service, and it appears that we are going to have more than one identity service: the one under the Data Protection and Digital Information Bill and this one. The two really ought to be working together.
With what I hope are those helpful remarks, I very much welcome the introduction of the dashboard.